Newsletter

A successful Digital Transformation starts with the customer

Utility companies are facing tremendous challenges. Yet, at the same time they operate in an industry where digital transformation can help them re-invent their own business model, achieve significant cost savings, develop new products and services, and build a strong focus on customer experience in order to achieve and deliver a better customer value.

While the customer life cycle hasn’t changed that much, the ways to achieve reach, acquisition, conversion, retention, loyalty and advocacy1 have, and this has to do with digital capabilities. In this article Sia Partners shares its view on why a successful digital transformation starts by placing the customer at the center and how digital transformation can help utility companies become more customer centric while reducing costs and increasing revenues at the same time.

Figure 1 – Customer life cycle stages1.

Customers’ expectations in a digital world

The first question to be asked is: who are your most valuable customers? Are your customers only people buying goods and services from your company? If we define customers as the key individuals to your future business growth than everyone is a customer: customer as supplier, as business partner, as employee, or as buyer. Your customers are people evolving in your ecosystem and the way you engage, serve and empower them is crucial to your future business growth.

But why is customer focus a hot topic (again)? To answer to this we have to zoom in on the new profile of the customer. Customers are increasingly digitally empowered with rising expectations. And also customers like you and I want consistent experiences across industries and across channels. As customers we are ‘spoiled’ by other best performing organizations like Google and Apple, or other industries like banking, telecom and multimedia that have focused on the customer experience earlier on, and we expect the same level of customer experience and service from our energy supplier.

In the meantime customer perception of the energy industry shows great room for improvement, and reveals significant deficits:

- Slow moving industry

Lack of innovation and changes with basic offers only

Lack of choice and differentiation in suppliers’ offers

Lack of flexibility with no room for negotiation in customer requests

- ​Lack of transparency

Remote, difficult to approach and distant

Non-transparent bills and tariffs

Lengthy administrative processes

- ​Lack of consumer focus and consideration

Little and unidirectional communication (monthly billing process)

Poor customer service with long response time, little ownership of client’s issues and follow-up on requests

Customers expect digital to bridge these gaps, they expect digital to be ‘for free’ and to provide cheaper products and services. Customer expectations have increased, there are now more channels to express and share customer opinions, and failing to deliver upon customer expectations will trigger customers to change energy supplier. According to ‘Energiemonitor 2015’ report from the Dutch Authority for Consumers and Markets (ACM: Autoriteit Consument & Markt) 15.1% of households have switched to another energy supplier in 2015, an all-time record and an increase of 2% compared with 2014 figures. While price remains the main driver for switchers, this figure highlights the importance of offering competitive prices as well as driving innovation and providing clear information to end-users. Therefore customer experience and service needs to be at the top of the corporate agenda.

A holistic approach to customer experience and service

Developing and implementing the desired customer experience requires the involvement and alignment of various departments within utility companies. This is not different from any other operation in the business. However in practice we often see misalignments between customer facing divisions and supporting processes, leading to poor customer experience, customer frustration and a damaged brand image for the utility. Hence a holistic approach to customer experience and service is required, where digital and organizational capabilities are considered carefully.

Customer experience does not only involve marketing. Moreover the role of customer service divisions, including contact centers for calls, emails, chat, social networks, ..., should certainly not be underestimated. Unfortunately customer service departments are too often considered by executives as a cost center, where they should be seen as a revenue, if not as a profit center. This clearly illustrates that often the customer experience is not approached in a holistic way.

It is often truly said that ‘No one ‘owns’ the customer experience except the customer’. Yet becoming best-in-class when it comes to customer experience does require leadership, prioritization from top management with a defined agenda for customer experience on board-level, and a company-wide approach.

The digital customer journey

By digitizing the customer experience, utilities can improve customer satisfaction and lower their costs to serve, while having the potential to improve revenue at the same time. In recognition of the opportunity, almost all major energy utilities have invested in online presence and especially mobile channels in recent years. But customers are seeking for more than online and mobile. Customer experience improves when there is an integrated multi-channel and multi-device approach, and when customers can effortlessly move across channels, enabling them to access features and content regardless of their preferred touchpoint and technology: this is called an omni-channel approach to the customer journey.

As part of their digital strategy, utilities need to decide what channels are most valuable and prioritize which ones to set up first. The digitalization of the customer experience and service will bring many benefits for both utilities and their customers.

Analytics based segmentation and socially informed knowledge: a digital (and seamless
multichannel) platformis a pre requisite for utilities to analysecustomer behaviour and information throughout the entire customer journey.

Digitally enhanced selling: use data analytics to enhance service quality, improve customer
relationship, and increase up selling and cross selling while customer usage of digital channel(s) is going up

Predictive marketing based on customer data (gathered across channels) and analytics to predict and anticipate customer needs.

Streamlined and improved customer processes are more cost effective.

*Note: in italic are benefits from an omni-channel approach.

Energy suppliers need to gain customers’ confidence by delivering best-in-class digitally enabled products and services through an omni-channel platform and by empowering them with digital technology. Only by doing so can they hope to reach a bigger share of customer spending in a market where margins on their traditional trading and retail businesses are shrinking and regulation becomes stricter. While digital channels are becoming the primary interface between an energy utility company and its customers, they play an increasingly critical role in setting perceptions for the overall brand. Therefore these digital interfaces must reflect quality and reliability to enable trust for a successful business relationship.

The key success factors

Utilities have to start planning to use digital as an opportunity to improve their financial performance, and their ability to succeed in a digitalized market; it is no option to ignore this, they have to adopt digital to better adapt. Ultimately utilities will see digital as a competitive advantage to improve their existing business, streamline operations while reducing the cost to acquire and cost to serve, and more importantly transform and re-invent their business model.

Yet setting up digital channels, and potentially an omni-channel platform, will raise questions about governance (Who is responsible for what channels? Who needs to be involved?), end-to-end processes (What are the impacts on the customer journey upstream and downstream?) and technological aspects (How to integrate and ensure consistent and real-time information availability for smooth channel transitions?). Here are four key success factors that will help energy utilities reach the potential that digital transformation offers:

Digital roadmap: as any other transformation exercise, digital transformation requires the alignment with your digital strategy and business vision resulting in an implementation roadmap where all necessary initiatives to reach your desired goal are linked. It needs commitment from the executive management and a top-to-bottom translation of the digital strategy into concrete values and objectives at every organizational level.

​Invest in your capabilities: assessing how digitally mature is your organization is only a first step. You will need to identify and prioritize the main business capabilities that you need to get on-board to reach your To-Be situation. This initial assessment will also serve as a reference when going through the transformation process and will help you keep moving forward. An example could be to develop data analytics capabilities on customers and customer behaviour in order to get more insight into cost to acquire, cost to serve and churn management.

Cross-functional approach: digital is omnipresent and should be led by a cross-functional team, and not by a unique business department like IT or Marketing. This is also true when redefining and streamlining your business processes around operations, marketing, sales and customer service - leveraged through Business Process Management (BPM) -, as well as process and data governance frameworks.

End-to-End approach: a successful digital transformation should look at leveraging your current business processes, infrastructure and application landscape as a whole. Getting the technology right and digitizing the front-end without sufficient consideration for the transformation of the entire end-to-end chain won’t allow you to reach the full potential and benefits of digital.

In recent years, Sia Partners has delivered numerous successful digital transformation projects within leading European energy utilities. You are welcome to visit our website for more information or contact us directly.

1 Stages in the customer life cycle as defined by Jim Sterne and Matt Cutler in a paper called “E-Metrics, Business Metrics For The New Economy”.